Bank mergers to benefit sector, end duplication of resources: Dena Bank CMD

Amid talks of consolidation gaining currency in the Indian banking space, public sector lender Dena Bank's Chairman and Managing Director (CMD) Ashwani Kumar has said the proposed move would bring about several benefits.

Without commenting on whether Dena Bank was also on the block for a merger with a bigger lender, Kumar said that consolidation would curb the duplication of resources in the public sector banking space.

"For example, we currently have instances of branches of multiple banks operating out of a single building and pursuing the same set of clients. Consolidation would check this phenomenon so that their resources could be diverted to other underserved segments," Kumar said.

Consolidation would also benefit banks in their capital requirements and help them better manage non-performing assets (NPAs), he added.

Finance Minister Arun Jaitley has already announced that the Centre is working towards consolidating public sector lenders. This process has gained momentum, especially after the State Bank of India (SBI) merged several of its associate banks with itself, including the Bharatiya Mahila Bank, a few months back.

At present, public sector banks (PSBs) are burdened with bad loans of over Rs 6 lakh crore. The Centre has realised that it is time to resolve the sticky NPA situation for the sector's long-term financial health.

The Centre aims to gradually build up 4-5 PSBs of SBI's size through consolidation.

According to reports, four PSBs – Canara Bank, Dena Bank, Syndicate Bank, and Vijaya Bank – have already made presentations about their consolidation road-map before the finance ministry.

Reserve Bank of India (RBI) Governor Urjit Patel has said that the Indian banking space would be more future-ready with fewer, yet healthier lending entities, allowing them to better deal with stressed assets.

There are 21 large and small PSBs in India and the central government is actively working towards bringing this number down to 10-12. However, the government does not want to rush towards consolidation without due diligence.

Meanwhile, Dena Bank has created a 'war room', which is manned by senior bankers, at its headquarters to deal with NPAs, which stood at 16.79 per cent at the end of March 2017.

"This specialised division is mandated with coordinating with regional offices and meeting customers for recovery. This has started to fetch positive results for us," Kumar said.

Dena Bank is also expanding its digital footprint and focusing on the agriculture, MSMEs (medium and small enterprises), and retail segments. It is aggressively organising credit disbursal camps to reach out to new customers.

Currently, the bank operates 85 branches in Uttar Pradesh and plans to expand its network to over 100 branches by March 2018. Last financial year, Dena Bank’s total lending in the state stood at about Rs 775 crore.